Hello Everyone.
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Welcome to my blog, the Cryptocurrency ecosystem is a vast ocean and our teacher @fredquantum, has dedicated most of his time to ensure we don't drawn and my sincere appreciation goes to him. In today's class we will looking at the concept of market makers and market takers, sit tight as I take you round.
Both market takers and makers play a vital role In the Cryptocurrency ecosystem, as the makers play a part in the provision of liquidity while Takers play the role of taking the liquidity earlier provided by the market maker.
An order book simply refers to a digital list which consist of all the buy and sell orders of an asset. An order book plays a vital role in matching orders, it is through the order book that orders are matched and executed. The order book shows the highest price buyers are willing to pay and the lowest price sellers are willing to sell their asset.
Market Makers are also known to be liquidity providers in the crypto market. Just as the name maker, market makers don't take the market as it is instead they decide the price at which they want to buy or sell their assets, and by so doing provide liquidity.
A Market Maker's order are not filled instantly, it must wait for the price of the asset to reach the price quoted by the trader before they are executed.
Market Takers are known to be liquidity takers in the crypto market. Just as the name implies, market takers take the market as it is and trade assets at the price provided by the market makers. Market Takers don't quote the price in which they want to buy or sell their assets.
A Market Taker's order are filled almost instantly.
| Market Makers | Market Takers |
|---|---|
| Liquidity providers. | liquidity takers. |
| They quote the price in which they wish to buy or sell their assets. | They buy at the price provided by the market markers. |
| Trades are not executed immediately | Trades are executed almost immediately. |
| They utilize the limit order (post only). | They utilize market order. |
Market takers and makers utilize different type of orders and this can be seen in the table below:
| Marketers | Order Utilized. |
|---|---|
| Market Takers | Market Order |
| Market Makers | Limit Order |
For an illustration as a market taker, I will be placing an order to sell my steem using the STEEM/USDT pair as seen in the screenshot below.
- I accessed my binance wallet and clicked on trades https://www.binance.com/en.
- I put in the amount of steem I wanted to sell but could not executed the trade as it was insufficient. If you look closely you will see that I utilized the market order.
For an illustration as a market maker, I will be placing an order to buy steem using the STEEM/USDT pair as seen in the screenshot below.
- Still on my binance wallet, I switched to limit order and steem was trading at 0.1889.
- I input the price I wanted to buy steem at to be 0.1788. if you look closely you will see that I utilized the limit order which gave me the room to quote the price at which I wish to buy steem.
In conclusion, both market makers and takers need each other for the market to function well. The provision of liquidity is important and taking the liquidity earlier provided is also important, that's why both market makers and takers need each other.
Thanks for reading my post.
all images are screenshots from my binance wallet unless otherwise stated..